Markets & Finance

Canadian explorer raises funds for Mandera oil block

RIG

An oil rig. Simba Energy has Sh32.5 million to carry out further exploration on its Mandera block. PHOTO | FILE

Simba Energy, a Canadian oil and gas explorer, has managed to raise Sh32.5 million to carry out further exploration on its Mandera block.

The listed Canadian explorer said it raised the funds through a private placement and will use the cash to meet work commitments as per the production sharing contracts (PSC) signed with the government.

“Net proceeds from the private placement will be used towards funding and exploration commitments associated with the company’s production sharing contracts, payment of certain trade payables, and for general working capital purposes,” said Simba chief executive Robert Dinning in a statement.

Simba has a 100 per cent interest in Block 2A located in Mandera Basin.

An investor presentation by the explorer indicates the next phase is to buy seismic data to be used to determine the best drilling points.

Oil and gas companies have continued with exploration work despite the falling price of oil which has created a difficult market for raising funds.

READ: Lenders shy away from oil explorers amid falling crude prices

The exploration momentum is being carried forward to this year after the government showed its seriousness at revoking licenses belonging to firms that were not doing work as per the PSC.

Energy secretary Davis Chirchir revoked Vanoil’s exploration licenses in February 2014 for blocks 3A and 3B located in Garissa after the firm failed to carry out any work since 2007 when it signed the PSC.

Tullow Oil, ERHC and Taipan Resources are the other explorers that have confirmed that they will continue with exploration despite an unfavorable capital raising market which has resulted in some firms facing financial trouble.

Afren, a UK explorer that is listed on the London Securities Exchange and has local interests, asked bondholders for more time to pay interest on its debt facilities.

“The company is continuing discussions with the advisers to the ad hoc committee of its largest bond holders regarding the immediate liquidity and funding needs of the business. The company is also having discussions with its existing stakeholders and new third party investors regarding recapitalising the company,” said Afren in a statement.

Afren is exploring on offshore Blocks L17 and L18 located in the Lamu coastal Basin and Block 1 in Mandera.

The firm has sought extension on interest payment for a bond and a loan it had taken, by at least a month.